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India Macro Weekly: Economic activity paints mixed picture

For the fortnight ending July 22, 2017:

·Real economic activity continued to look weak as per the latest Index of Industrial Production (IIP) release for May 2017, which puts growth at a meagre 1.7%, the slowest in three months. A decline in capital goods production as well as continued weakness in consumer durables’ production are responsible for the drag down, though majority of other segments have not performed well either.

·The merchandise foreign trade report for June 2017 still giving room for optimism as both exports and imports continue to increase. Exports grew by 4.4% and imports by a far more robust 19%. Trade deficit, too, has come off its recent highs.

·Inflation continues to surprise pleasantly, with that based on the Consumer Price Index (CPI) coming in at low of 1.5% in June 2017. Food price deflation led the decline, though core inflation too, is coming off.

·Inflation based on the Wholesale Price Index (WPI) also came off to 0.9% in June 2017 on account of primary articles’ deflation.

·The House Price Index (HPI) release for Q4, 2016-17 came in at 10.5%. HPI inflation is now at a one and a half year high, which is in contrast with recent trends in consumer price inflations, but aligns with the continued rise in other financial markets, like equities.

·The foreign tourist report continued to be healthy, posting over 20% growth rates for the April-June 2017 quarter for both tourist arrivals as well as earnings.

·With respect to Agriwatch, the rains are normal for the seasons as a whole. The pace of Kharif sowing also slowed down in the past week, though coverage under cotton continued to be strong.

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